Building industry in Shetland fears hundreds of job losses

The construction industry in Shetland is warning that firms could go bust with hundreds of local jobs lost if the council uses an outside contracting organisation for some of its building projects.

Builders, architects, engineers, surveyors and other members of the construction trade say they are already suffering badly from the loss of an increasing amount of local work due to centralisation of procurement by other organisations, including the NHS, police and fire services, Scottish Water, the Met Office and even private companies like the banks.

Some local contractors have already shed workers recently and more redundancies are expected in the coming months.

“There’s virtually no work being done that local concerns can get at,” one respected industry source told The Shetland Times this week. Yet on any day he said there was “a whole heap of white vans” coming off the NorthLink ferries bringing contractors to do jobs which previously would have gone to local firms.

Now there is a fear the work shortage will get a lot worse as the council cuts its capital spending and considers sourcing cheaper building deals through a government-spon­sored central procurement scheme called hubco.

It is difficult to get people in the building trade to speak publicly about their dealings with the council due to fears they could jeopardise their prospects of future work. But they report that times are becoming unusually tough for a number of reasons, obviously including the cuts in private and public spending as a result of the UK economic crisis.

The council is one of the biggest providers of regular building work and it will become known next month during the budget-setting exercise how it intends trimming its capital spending programme for the years ahead.

On top of that looms the danger the industry perceives from the council’s decision to join hubco, which gives the UK’s biggest building company, Miller Group, exclusive access to many public sector building contracts in the north of Scotland.

Last month councillors enthusiastically backed the proposal to join the public-private partnership hubco network – the last local authority in Scotland to do so. It had resisted taking part because there had been few obvious benefits until the government sug­gested it was a potential avenue for funding of up to £18 million for a slimmed-down £30 million Anderson High School.

The North Territory Hub, which public sector organisations like NHS Shetland and the council are now involved in, is a partner­ship between the government’s Scottish Futures trust and the private sector company Alba Community Partnerships, which is made up of the UK’s biggest housing and construc­tion company Miller Group and international private finance initiative specialists Cyril Sweett Investments.

Alba owns 60 per cent of the hubco and controls its day-to-day decisions while profiting from its exclusive access to many public sector building contracts.

The industry source warned: “If all the bigger more-lucrative jobs go to Miller for 15 years … you will start to see builders folding.”

Similar concerns are said to be being expressed by parts of the building industry in Orkney and the Western Isles whose councils are already hubco members.

Local contractor Tulloch Developments is one of those with concerns about where the council is heading. Director George Smith is on the Shetland construction industry working group which meets council officials periodically to discuss current issues and future workloads. He said the main concern for Tulloch’s at the moment was the lack of any consultation with the building trade about hubco and its likely effects before councillors agreed to join it.

“We’re in the dark at the moment,” he said yesterday. “Certainly there was no consultation done with either the local suppliers or contractors.”

He conceded that perhaps there may be no serious detrimental effect on the local trade but that is not known due to the council’s failure to discuss it. He also acknowledged that it might be the case that the council had no option but to take part in hubco if it meant funding was going to be forthcoming for the Anderson High.

However, if projects are lost regularly to south contractors he warned there “could be a lot of jobs on the line”.

It is understood the industry is annoyed that it was led to understand there would not be an early decision about the hubco. But on 19th December it was discussed and agreed by the executive committee with considerable enthusiasm, including questions demanding to know why the council had not joined before. Councillors were not told that the Shetland construction industry had issues with the hubco.

Mr Smith felt the elected members had been denied “a proper balanced view” in the report they approved because it lacked input from the trade.

Indeed, scrutiny of the report reveals a paragraph where the wider implications of joining the hubco were meant to be spelt out. Yet under “community/stakeholder issues” it simply states: “None.”

Councillor Allan Wishart has been active in listening to the building trade’s concerns and is involved in setting up another meeting with the council shortly. This week he sought to soothe their fears about hubco. Although the SIC is joining it, he said it was not compelled to buy projects through the system.

“I do not see it as a big threat,” he said. “If you have better experience, better knowledge, better products available locally there is no restriction or constraint on buying locally.”

If the council remained outside the network there was the danger it might find itself left behind or excluded from new funding programmes. “I think it is just being part of the club but it doesn’t compel us to do everything the club does,” he said.

He acknowledged the wider concern about what work is going to come from the council in the coming years of relative austerity in Shetland. There is also considerable worry about the effects of the council’s stated intention to save money by procuring more of its goods and equipment through a central Scottish system.

“There is a lot of angst there,” he said, “but at the same time there are quite a lot of Shetland companies that are doing quite well.”

The Scottish government’s hubco concept was recently condemned by Shetland MSP Tavish Scott who called for a rethink. He said big business was being handed the right to design and build everything the public sector needs and he criticised the amount of form-filling required of small firms to be considered for a share of the work through sub-contracts.

Writing in his Thursday column in The Scotsman the Lib Dem MSP said public sector building projects were now “the plaything of big companies” and it was “unlikely” that local fire stations, health centres or primary schools costing £3 million or less would be designed and built by small local firms, electricians and plumbers.

He said the result of projects being done by “big boys with little commitment to the area” was little comeback when things need fixing.

About John Robertson

3 comments

Mike Bradley

January 6th, 2012 13:52

The Met Office in Shetland employs 7 local people directly and indirectly employs local contractors to carry out essential services and maintenance. The contract for the new Met Office due to start this year has been advertised nationally and local companies have also been invited to tender. I must therefore question why we have been included in this article ?

Further to Mr Bradleys comment in response to this story, I have carried out some investigation into Met Office procurement on this contract and find that it illustrates perfectly the concerns being raised locally by the building industry.

The Architectural services on this modest building are being supplied by Pick Everard from Leicester, “who were selected in line with mandated Government policy of using central framework agreements via the Government Procurement Services website”.

The Quantity Surveying services are also being supplied by Pick Everard “who were appointed following a mini-competition carried out under the Government Framework Agreement rm475 Project Management & Full Design Team Services. In line with Government Policy for all Central Government Bodies to use Government framework agreements, via the Government Procurement Service”.

I have only a limited supply of sympathy for most of the local building contractors; having work taken away due to hubco may not be their fault however having little or no alternative work lies squarely at their own doors following years of being interested in nothing other than new builds and/or pandering to the council and other “big” businesses – while ignoring the individual householders, with jobs that “weren’t worth the effort”. This year would be three years and counting that I’d have been waiting for a local guy who “promised” to come and move a doorframe and put down a new wooden floor. Just as well as I found an alternative solution.

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